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Market Update
Weekly Recap - Week ending 14-Dec-07 After trading in volatile fashion, the major averages finished the week noticeably lower, as concerns about weakness in the financial sector and credit market turmoil continued to weigh on investor sentiment.
Stocks rose on Monday, as investors welcomed a strategic investment in Swiss banking giant UBS AG (UBS), and a report that bond insurer MBIA Inc. (MBI) will receive a $1 billion capital infusion from private equity firm Warburg Pincus, as signs of relief for the beleaguered financial sector.
The market continued to rally ahead of the Federal Reserve's policy-setting meeting on Tuesday; however, stocks ended the session lower as investors dismissed a quarter percentage point cut in the fed funds rate.
The Fed trimmed its key interest rate for the third consecutive time to 4.25%, and also lowered the discount rate by 25 basis points to 4.75%.
Investors were hoping for a larger rate cut and more aggressive action by the Federal Reserve amid mounting concerns that the liquidity strain in the financial markets could lead to larger problems for the economy.
Meanwhile, U.S. treasuries rallied on Tuesday as investors fled to safe-haven investments. The 10-year note gained more than one full point to yield 3.99% during the session.
On Wednesday, the market was caught by pleasant surprise when the Federal Reserve announced it is coordinating efforts with other central banks to add liquidity through a series of auctions of term funds and currency swap lines to help ease current credit market pressures.
Stocks surged in the early-going on the news, but steadily declined during the session to finish only modestly higher.
The Fed's efforts to increase short-term lending did little to boost shares in the financial sector, which remained under pressure after Bank of America (BAC) warned that its fourth quarter results would again disappoint and student lender SLM Corp. (SLM), also known as Sallie Mae, cut its full-year earnings forecast and said a group of investors led by J.C. Flowers no longer had any interest in buying the company.
The market closed mixed on Thursday with the tech-heavy Nasdaq posting a slight decline, as investors digested a mixed batch of economic data.
In a positive sign for the holiday shopping season, the Commerce Department reported retail sales rose 1.2% in November, well above analysts' expectations for a 0.6% increase.
Separately, however, the Labor Department said its producer price index jumped 3.2 % as gasoline prices surged to record levels. Excluding food and energy costs, core PPI was still up a larger than expected 0.4%, which fanned inflation concerns.
In corporate news, Dow component Honeywell International (HON) issued positive guidance for fiscal 2008, and investment bank Lehman Brothers (LEH) reported fourth quarter and year-end results that were much better than expected in spite of ongoing credit market issues.
Stocks were undercut on Friday, though, due to a rise in consumer inflation and more bad news in the financial sector.
The Labor Department said its consumer price index rose 0.8% in November, due in part to a jump in gasoline prices, raising further questions about the direction of the economy. Excluding food and energy prices, the core CPI was up 0.3%. That was above the expected 0.2% increase, and reflects the inflationary pressures noted in the most recent Fed policy statement that may have been a factor in holding the Fed back from cutting rates even more.
On the corporate front, financial giant Citigroup (C) announced plans to consolidate $49 billion worth of assets from several of its structured investment vehicles, or SIVs, that have been hurt by the meltdown in sub-prime lending and tighter credit markets.
Also, Dow component United Technologies (UTX) reaffirmed its full-year outlook and offered a mixed forecast for next year. Power tool maker Black & Decker Corp. (BDK) lowered its fourth quarter earnings target due to a recall of some portable drills and continued challenging business conditions in North America, stemming from the fallout in the housing and credit markets.
--Richard Jahnke, Briefing.com
http://finance.yahoo.com/marketupdate/update
Weekly Recap - Week ending 14-Dec-07 After trading in volatile fashion, the major averages finished the week noticeably lower, as concerns about weakness in the financial sector and credit market turmoil continued to weigh on investor sentiment.
Stocks rose on Monday, as investors welcomed a strategic investment in Swiss banking giant UBS AG (UBS), and a report that bond insurer MBIA Inc. (MBI) will receive a $1 billion capital infusion from private equity firm Warburg Pincus, as signs of relief for the beleaguered financial sector.
The market continued to rally ahead of the Federal Reserve's policy-setting meeting on Tuesday; however, stocks ended the session lower as investors dismissed a quarter percentage point cut in the fed funds rate.
The Fed trimmed its key interest rate for the third consecutive time to 4.25%, and also lowered the discount rate by 25 basis points to 4.75%.
Investors were hoping for a larger rate cut and more aggressive action by the Federal Reserve amid mounting concerns that the liquidity strain in the financial markets could lead to larger problems for the economy.
Meanwhile, U.S. treasuries rallied on Tuesday as investors fled to safe-haven investments. The 10-year note gained more than one full point to yield 3.99% during the session.
On Wednesday, the market was caught by pleasant surprise when the Federal Reserve announced it is coordinating efforts with other central banks to add liquidity through a series of auctions of term funds and currency swap lines to help ease current credit market pressures.
Stocks surged in the early-going on the news, but steadily declined during the session to finish only modestly higher.
The Fed's efforts to increase short-term lending did little to boost shares in the financial sector, which remained under pressure after Bank of America (BAC) warned that its fourth quarter results would again disappoint and student lender SLM Corp. (SLM), also known as Sallie Mae, cut its full-year earnings forecast and said a group of investors led by J.C. Flowers no longer had any interest in buying the company.
The market closed mixed on Thursday with the tech-heavy Nasdaq posting a slight decline, as investors digested a mixed batch of economic data.
In a positive sign for the holiday shopping season, the Commerce Department reported retail sales rose 1.2% in November, well above analysts' expectations for a 0.6% increase.
Separately, however, the Labor Department said its producer price index jumped 3.2 % as gasoline prices surged to record levels. Excluding food and energy costs, core PPI was still up a larger than expected 0.4%, which fanned inflation concerns.
In corporate news, Dow component Honeywell International (HON) issued positive guidance for fiscal 2008, and investment bank Lehman Brothers (LEH) reported fourth quarter and year-end results that were much better than expected in spite of ongoing credit market issues.
Stocks were undercut on Friday, though, due to a rise in consumer inflation and more bad news in the financial sector.
The Labor Department said its consumer price index rose 0.8% in November, due in part to a jump in gasoline prices, raising further questions about the direction of the economy. Excluding food and energy prices, the core CPI was up 0.3%. That was above the expected 0.2% increase, and reflects the inflationary pressures noted in the most recent Fed policy statement that may have been a factor in holding the Fed back from cutting rates even more.
On the corporate front, financial giant Citigroup (C) announced plans to consolidate $49 billion worth of assets from several of its structured investment vehicles, or SIVs, that have been hurt by the meltdown in sub-prime lending and tighter credit markets.
Also, Dow component United Technologies (UTX) reaffirmed its full-year outlook and offered a mixed forecast for next year. Power tool maker Black & Decker Corp. (BDK) lowered its fourth quarter earnings target due to a recall of some portable drills and continued challenging business conditions in North America, stemming from the fallout in the housing and credit markets.
--Richard Jahnke, Briefing.com
http://finance.yahoo.com/marketupdate/update
